AEB

http://petroleumtruthreport.blogspot.com/
Total Rating:
0 / 0

13 Comments

    • Sat Sep 6th 09:50 AM | Rating: 0 0
      Commented on:
      Energy Independence: It's About Demand, Not Supply
      Whenever a politician talks about energy independence as something possible in the next 25 years or less, you know he/she is a liar (or hopelessly misinformed). The U.S. is the most mature petroleum province on earth (and still the 3rd biggest oil producer!), and there is just not much probability of finding huge new reserves here.

      What's wrong with being energy dependent anyway? I don't hear anyone calling for coffee independence. The whole nature of trade is that I have something that you need, and you have something that I need. This is good and healthy.

      The perception that imported oil is mostly from the Middle East is not really correct. We import 20.3% of our oil from Canada, 20.1% from the Persian Gulf countries, 12.3% from Saudi Arabia, 10.8% from Mexico, 9.4% from Nigeria, 8.2% from Venezuela, and 6.2% from Iraq.

      Even if you take the most optimistic view possible of areas in the U.S. that are currently closed to exploration, they still won't make us energy independent. Don't misunderstand me--I think we should drill in these areas. Just don't expect that we will find something so big that we won't have to import oil.

      ANWR has been evaluated over and over by oil companies and it doesn't look that good (the USGS estimate of 15 billion barrels is limited to "technically recoverable" and not commercial oil--if it is scattered in many smaller pools none of it will be commercial).

      The offshore East Coast has been drilled before it was off-limits and was considered a dog by the industry. Offshore California has some promise as does the eastern Gulf of Mexico but the probable reserves are not enough to make the U.S. energy independent.

      Conservation makes great sense but it won't make us energy independent because we use so much energy. Alternate fuels make great sense but none of them are ready commercially for at least 25 years. Building more fuel efficient cars is great (I think we already do a lot of that but people have preferred SUVs, etc.) but it takes a long time before we get all the less efficient cars off the road.

      So, let's stop this energy independence talk. We should do anything and everything to be smarter about how we get and use energy, but let's be practical and realize that energy independence is not real in the near-term, as much as we want it to be!
      View article »
    • Sat Sep 6th 09:18 AM | Rating: 0 0
      Commented on:
      Unconventional Energy Still Attractive - UBS
      UBS' opinion is typical of analysts who know very little about the reality of the oil and gas business. $9/Mcf is not valid since the average spot price was $7.30 (Henry Hub) this week and plunging. The average U.S. wellhead price fell $2.30 in August compared to July to $8.32/Mcf and it will be much lower for September.

      At these prices, none of the great shale plays are commercial. That is why Chesapeake has been having a fire sale on its leases in the Haynesville, Woodford and Fayetteville shales. Barnett Shale production in Q2 2008 had fallen 20% from Q3 2007 before the fall in gas prices because of perceived higher unit prices in Haynesville and Marcellus.

      If drilling and leasing in the shale plays declines as it should, gas prices may rise but it will take a few quarters before this is felt.

      As an industry insider, I like natural gas plays but there are hard times ahead for the companies involved in the shale plays. They paid too much for new leases and deals when gas prices were high (Plains paid $30,000/acre in the Haynesville!), and are using borrowed money to drill. They all have huge quarterly debt service and hedging losses so far in 2008 (Chesapeake's long-term debt was more than $13 billion before they started selling, and the company is only worth about $3.5 billion).

      So I hope UBS is right, but it's hard to see what they based their positive opinion on. Does anyone think there might be something in it for them if a lot of people buy gas company stocks through them based on their advice????
      View article »
    • Sat Sep 6th 09:02 AM | Rating: 0 0
      Commented on:
      Time To Consider Oil's Homely Cousin, Natural Gas
      The main factor in the drop in natural gas price is the huge increase in domestic production. Production is up almost 8% or 5 Bcf per day in the 1st half of 2008 compared to the same period a year ago. This has produced the perception that there is an over-supply of gas.

      The proliferation of new shale gas plays, like the Haynesville and Marcellus, has enhanced this perception. The average U.S. wellhead price for natural gas fell $2.30 from July to August to $8.32/MMcf.

      At this price, none of the shale plays are commercial. Barnett Shale production had already fallen 20% in Q2 2008 compared to its peak in Q3 2007. This will eventually increase gas prices after the lag effect.
      View article »
    • Wed Sep 3rd 21:39 PM | Rating: 0 0
      Commented on:
      British Petroleum Moves into Arkansas with Chesapeake Energy Shale Purchase
      Why is it that analysts never ask the question, "Will this make any money?" Why is it assume that if a big company like BP thinks this is a good idea, it must be a good idea. Has anyone ever been to a party late? There's not much opportunity there, just cost.

      Why do you think that Chesapeake is selling everything in sight? Because shale gas makes no economic sense whatsoever at less that $9.00/MMBtu wellhead price (for all the analyst types that no nothing about the oil and gas business, that means after transportation and processing costs, often $1.50/MMBtu).

      Shale.com is the biggest scam since Subprime.com. When the music stops (as it has in the Barnett Shale), only the shareholder will lose...again.
      View article »
    • Wed Jul 16th 11:28 AM | Rating: 0 0
      Commented on:
      Why Are Oil Prices So High? Gold Solves the Riddle
      I don't understand why smart people spend so much effort trying to make the high price of oil seem complicated. Worldwide demand has expanded as the benefits of the global economy have spread. Supply, while not an immediate problem for the short-term, is not expanding. Punto!

      The idea that a weak U.S. dollar somehow controls the worldwide price of oil is parochial, at best. It does make oil more expensive for countries whose currency is tied to the U.S. dollar. It also encourages investment in commodities, like oil, that are relatively more attractive than investments in treasury bonds and elsewhere in the U.S. economy. Push the Fed to raise interest rates if you want to fix this.

      Finally, the mindless litany about speculators pushing up the price of oil by futures trading needs needs a moment of ground truth. There is no correlation between the percent of speculation on the NYMEX and the annual price change of oil over the past 10 years. Look at the data rather than repeat the uninformed statements of others. Speculation has increased as it always does in any market that has a lot of mobility. That doesn't mean that speculation is increasing the price. Remember, just because you buy a contract (whether speculative or not) doesn't mean anything unless someone will buy it.

      Let's stop bantering about secondary or tertiary factors regarding the high price of oil and look at the fundamentals. Don't forget about price elasticity: it takes time to change momentum (price increase). Whenever future price expectation is different than spot price, spot price must adjust until the two are again in equilibrium. That is happening with oil price. U.S. demand is down 1 MMbopd since January. The price will fall.

      Keep it simple.
      View article »
    • Fri Jun 20th 06:49 AM | Rating: 0 0
      Commented on:
      Oil's Supply and Demand
      jcrash doesn't understand that we have also reached the limits of global natural gas supply. Read my blog: petroleumtruthreport.b.../ or the summary version in this month's World Oil magazine: worldoil.com/Magazine/...
      View article »
    • Wed Jun 18th 06:38 AM | Rating: 0 0
      Commented on:
      Economics of Oil Futures Trading, Part I
      Erub makes a good point about the bubble cycle, though I am not certain that poor regulation of markets is either the cause or the solution. It seems more likely that absurdly low interest rates encourage migration of investment into whatever sector offers the lowest risk profit.
      View article »
    • Tue Jun 17th 22:54 PM | Rating: 0 0
      Commented on:
      Economics of Oil Futures Trading, Part I
      As Checkhov said (who was an MD in addition to being a writer), "When many cures are offered for a disease, it means the disease is not curable."

      I have read endless debates about whether or not futures speculation on oil is a big problem, a small problem or not a problem. There are many credible arguments that support each position.

      The disease is not curable.

      I think that everyone needs to get over this issue about speculation, and focus on the real supply and demand issues that underlie oil and gas prices. If there were no imbalance, no one would speculate because there would not be the possibility of profit.

      People will hedge, speculate, invest, cheat, and complain until the game is over, and they move on to the next game where money can be made.

      What will legislation address? Who specifically is to blame? Name some names, not broad groups of faceless people like index funds. Are you sure that your portfolio doesn't contain index funds? Are we our own enemy?

      There is no cure for this symptom.


      View article »
    • Sat Apr 5th 10:32 AM | Rating: 0 0
      Commented on:
      Filling Up on Natural Gas
      Natural gas production was not flat in 2007 in the United States, but increased about 4%. Unfortunately, demand increased 6%.
      View article »
    • Sat Apr 5th 10:30 AM | Rating: 0 0
      Commented on:
      Filling Up on Natural Gas
      50 million gallons of ethanol requires 1.5 Bcfg, not 5 Bcfg as stated in the article. That means that it takes 11 MM gallons of oil equivalent to produce the heat to make 50 MM gallons of ethanol.
      View article »
    • Tue Mar 18th 20:28 PM | Rating: 0 0
      Commented on:
      Investing in the Marcellus Shale
      How can anyone legitimately claim finding and development costs of <$1/Mcfg when a consortium of major U.S. gas producers (including Anadarko, Apache, Chesapeake, Devon, EOG, Newfield, Nobel, Plains, and XTO; see: www.eogresources.com/m...) have an average cost of $4.35/Mcf?

      Even excluding DD&A and interest costs, lease operating cost (LOE) and overhead cost (G&A) for these operators average $1.25/Mcf.

      I think that your claims of absurdly low F&D costs explain the giddy enthusiasm for shale plays that consume huge amounts of capital with miserable full-cycle economic results. The Barnett Shale is the model and only about 28% of wells will break even.
      View article »
    • Mon Mar 17th 21:14 PM | Rating: 0 0
      Commented on:
      U.S. Financial Crisis Is Increasingly Self-Feeding
      The article is an excellent, simple explanation. It leaves out the important element of leverage, without which there would have been no margin calls. I don't think that this is well understood by most people.
      View article »
    • Sat Dec 29th 10:58 AM | Rating: 0 0
      Commented on:
      Natural Gas Prices Lack Energy
      A histogram of daily Henry Hub spot prices for 2007 and monthly average modes of Henry Hub prices suggest that the natural gas price was incredibly flat for 2007 at around $7.50/MMbtu.

      I don't think that it is especially meaningful to take the difference between the starting and ending (averages?) of prices for the year and proclaim a 32% gain as you did in Lies, Damn Lies and Natural Gas or the WSJ did (11% gain).

      The great anomaly in 2007 was how little fluctuation was observed through all of seasonal changes compared to recent previous years. That suggests an underlying concern about supply that tends to support the price despite high supply and low heating/cooling demand.

      Abnormally high LNG imports in the spring caused the only real dip in price, and that was due to a warm winter in Europe, itself an anomaly.

      AEB
      View article »
Loading...
Symbols:
Authors:
Quick Links:
Contribute an Article Become a Seeking Alpha Contributor

Transcripts

More Transcripts»